* LLB accused of aiding wealthy Americans to evade tax
* Negotiations centre on LLB's Liechtenstein arm
* LLB's Swiss arm excluded from settlement being discussed
* Sale of swisspartners on hold
ZURICH, July 18 (Reuters) - Liechtenstein's second-largestbank LLB is close to a settlement with U.S. prosecutorsinvestigating tax evasion and has set aside an additional 31million Swiss francs ($33 million) of provisions, it said onThursday.
LLB would become the third European bank, afterSwitzerland's UBS and Wegelin, to settle with U.S.authorities clamping down on offshore banks they accuse ofhelping wealthy Americans to avoid paying tax.
The tiny European principality of Liechtenstein has beenquicker than Switzerland to succumb to pressure on its bankingsecrecy laws, but its banks have struggled with the resultingdrop in client assets.
Liechtensteinische Landesbank, or LLB, said it is confidenta solution with U.S. authorities could be found in the comingweeks. The bank's provisions for the U.S. tax dispute now total47 million francs.
"It's now a case of clarifying final details and finishingnegotiations with the U.S. authorities," LLB spokesman CyrillSele said.
The Swiss arm of LLB, which is closing, would be excludedfrom this solution, Sele added.
LLB's Swiss arm is one of more than a dozen banks inSwitzerland under formal investigation by the United States,including Credit Suisse, Julius Baer, theSwiss arm of Britain's HSBC, privately held Pictet andlocal government-backed Zuercher Kantonalbank andBasler Kantonalbank.
Swiss banks will be allowed to cooperate with U.S.authorities under a government plan agreed this month in anattempt to help its banks avoid criminal charges.
The U.S. investigation has put the brakes on LLB's plannedsale of swisspartners, a wealth manager that specialises instructuring funds to minimise tax payments.
LLB announced in March that it was cutting nearly a quarterof its staff and expected a restructuring charge of 7 millionfrancs as a result of the closure of its Swiss arm.
The provisions, along with other costs, will drag down thebank's profit by nearly 80 percent to 14 million francs when itreleases audited first-half figures on Aug. 29, LLB said.
"The implementation of strategic initiatives is on track,though it has led to certain extraordinary costs," analysts atZuercher Kantonalbank said. "In terms of operation, LLB is doingbetter than we had previously expected."